Paym ent Platform s and Consum er Choice: Paym ent Platform s and Consum er Choice: Com peting for Consum ers’ Mind Com peting for Consum ers’ Mind Chicago Federal Reserve Payments Conference May 10, 2007 W illiam McCracken CEO SYNERGI STI CS Research Corp. 1
Who Has the Power? “Perhaps nowhere else in banking do consumers have as much influence as they do on the retail payments sector” Bank Systems & Technology 2
The Future? � All cards on one chip- card number and type, expiration date, and some means of authenticating � Cardless world- Biometrics tied to your payment accts � Smart Cards- Card issuers now have smart credit cards that are "pre-approved" for a certain number of transactions and a certain amount of credit � Electronic Purses- Smart card that actually stores money rather than account information 3
Annual Number of Noncash Payments in 2000 and 2003 2000 Estimate 2003 Estimate (billion) (billion) CAGR* Noncash Payments 72.5 81.2 3.8% Check 41.9 36.7 -4.3% Credit Card 15.6 19.0 6.7% ACH 6.2 9.1 13.4% Offline Debit 5.3 10.3 24.9% Online Debit 3.0 5.3 21.0% EBT 0.5 0.8 15.4% *CAGR is the compound annual growth rate . 2004 Federal Reserve Payments Study 4
Debit Card Usage by Age 80 70 60 50 40 75 % 68 67 30 59 20 10 0 Total 18 to 34 35 to 49 50+ (Base = 1,013 total respondents ) 5
Online Bill Payment by Age 100 80 60 % 40 78 68 68 62 20 0 Total 18 to 34 35 to 49 50+ (Base = 1,013 total respondents) 6
Largest Purchase Amount to Use Cash DK 5% < $5 10% $5-$14.99 12% $15-$24.99 $50+ 11% 47% $25-$49.99 15% 2006 Avg: $19.43 7
Payment Methods for POS Purchase Under $5 Cash 81 24 Debit Cards Credit Cards 17 Gift/Prepaid 6 Cards % 0 20 40 60 80 100 (Base = 1,013 total respondents) 8
Preferred Pymt. Method for Purchases Under $5 52 Cash 2 PayPal/Other Svc 34 10 Credit Card 21 11 Debit Card 18 10 Biometric POS 8 2 Online Prepaid/Gift Card 6 8 Contactless Card 5 0 10 20 30 40 50 60 % 9
Usage of Cell Phone, PDA, or MP3 for Financial Activities Used Cell Phone, PDA or MP3 11% No 89% (Base = 1,013 total respondents) 10
Likely to Use Cell Phone, PDA or MP3 for Financial Activities Likely 19% No 81% (Base = 1,013 total respondents) 11
Advantages of Using Wireless Devices for Financial Activities 24/7 56 Done Out of Town/ Vacation 54 Almost Anywhere 52 Emergency 48 Save Postage 45 Save Time 44 Pay Bills on Due Day 42 Info Up-to-Date 34 % 0 10 20 30 40 50 60 (Base = 1,013 total respondents) 12
NTT DoCoMo 2006 study Mobile to Replace Cash & Plastic? 13
Comic: Zits All consum ers are not alike….. 14
Predicting the Future is Risky � “I think there is a world market for perhaps 5 computers” Thomas Watson, CHM of IBM, 1943 � “There is no need for an individual to have a computer in his home” Ken Olsen, President of DEC, 1977 � “No one will need more than 637kb of memory for a personal computer. 640k ought to be enough for anybody” Bill Gates, founder of Microsoft, 1981 � “Heavier than air flying machines are impossible” Lord Kelvin, British mathematician & physicist, 1895 � “Radio has no future” Lord Kelvin, British mathematician & physicist, 1895 15
Conclusion � The Consumer is king! They determine the winners � To increase success of a payment method……tell them what’s in it for them � It is always nice to ask 16
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